Rosewood Hotels & Resorts

HARVARD BUSINESS SCHOOL

Company ProfileHeadquartered in Dallas, Texas

Established in 1979 by the Caroline Rose Hunt Trust Estate

BACKGROUNDFirst hotel

managed:The Mansion on Turtle

Creek,1980

Old mansion in Dallas rescued from demolition by Mrs.

Hunt

Company ability to creating unique, one-of-a-

kind properties

2003, Rosewood had 12 hotels worldwide, with a total capacity of 1,513

rooms

Pricing:$120 for one of the Saudi Arabian properties to

$9,000 for a Canadian lodge

Objectives of this case

Determining issues for the company

OBJECTIVE-1

ROSEWOOD

OBJECTIVE-2

Determine Competition in the specific hotels & resortsindustry

OBJECTIVE-3

Philosophy of Rosewood

OBJECTIVE-4

Strategies & Decisions Undertaken

Caroline Rose Hunt: Honorary Chairman

Philip Maritz: Chairman of the board

John Scott: President and Chief Executive Officer

Robert Boulogne: Chief Operating Officer

James McBride: Managing Director of The Carlyle, New York

The Main Players

The Objective Operating as a “collection” of unique properties, each with

its own name or brand,

Unlike the corporate brand model, in which luxury tended to follow a “Canned and Cookie cutter” approach across properties

OPERATIONS OF THE COMPANY

Fall in the number!!

REASONS FOR THE FALL

Issue 1:

Scott recognized that the Rosewood brand had

Low recognition and Brand-wide usage among guests and was an untapped

asset.

ISSUES

Issue 2:

Emphasis on individual property brands was not working from a number of fronts.

Guests not making the connection and Low Brand Visibility.

Issue 3:Brand Positioning• Philip Maritz questioned Rosewood’s individual branding positioning

• Intense competition in the luxury hotel segment,

• and Current brand posititioning limiting the market

Source: Rosewood Hotels & Resorts

Competition Analysis

High Competition!!

2 groups of luxury hotels: 1. Corporate branded Ritz-Carlton, Four Seasons, St. Regis, One&Only, and Mandarin Oriental hotels.

2. “Collections” of individually branded unique hotels, such as Auberge, RockResorts, and Orient-Express.

The Competition

Better Performance than its competitors

But other parameters!!

The Philosophy Concept of “A Sense of Place®”

Design to Service to Programming, tailoring each property experience to what is special about a given location, architecture, history, and culture

The Strategic Journey Original (1990’s) collection growth strategy was two-fold

Convert existing iconic, luxury hotels with strong

brand equity Creating brand equity in the property itself

(A)Majority of consumers did not know the brand

(B)Few who did had learned the name Rosewood from their travel agents

Insights of 2003 report from Strategic Marketing Solutions

Decisions

Undertaken

DECISION 1: Switching to an automated data-gathering through its central reservation system (CRS), and was creating one global, flexible data warehouse for all its hotels.

AIMTo expand the customer preference and profitability program across the entire brand

Decision 2:

Scott and Boulogne believed in:

Adopting a corporate branding approach,

AIM Create guest connection with Rosewood properties

Encourage multi-property guest stays

Creating Brand’s lifetime value

Case Study:

AmanResorts model

What is AmanResorts Model? A luxury resort hotel management company with corporate-branded

properties located in remote natural settings

Nicknamed its core followers “Aman Junkies,” prided themselves on collecting Aman experiences

Aman resorts sold the promise of pure, unadulterated quiet

A New Brand Strategy to Build Customer Lifetime Value

STRATEGY PROJECTIONS

A spreadsheet model that projected Rosewood’s brand-wide customer lifetime value (CLTV) developed, using nine financial and operational input variables related to rooms, guests, and marketing and acquisition costs.

Source: Rosewood Hotels & Resorts

Impact of corporate branding strategy the initial analysis & the following working assumptions:

1. The number of multi-property guest stays was anticipated to double to 10% from the 5% rate the company experienced during the previous year, raising the average number of visits per year per guest from 1.2 to 1.3, inflating the total number of repeat guests

2. The overall total number of unique guests was kept constant at 115,000.

3. A marketing and operations investment of $1 million per year necessary to implement the corporate branding strategy.

Scott had high hopes for Rosewood:

“I want to emulate the AmanResorts model and develop ‘Rosewood junkies’ who will seek out Rosewood properties exclusively.”

Rosewood’s Brand-wide Customer Lifetime Value Spreadsheet Model

Without Rosewood Branding With Rosewood Corporate Branding

Total number of unique guests 115,000 115,000Average daily spend $750 $750Number of days average guest stays 2 2Average gross margin per room 32% 32%Average number of visits per year per guest 1.2 1.3Average marketing expense per guest $130 To be calculatedAverage new guest acquisition expense $150 $150Total number of repeat guests e 19,169 To be calculatedTotal number of multiproperty stay guests 5,750 To be calculatedAverage Guest Retention Rate 16.67% To be calculatedAverage Gross Profit per Guest To be calculated To be calculated

THE SPREADSHEET SHOWS THE GROWTH OF THE BRAND THROUGH THE NEW STRATEGY!!